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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (date of earliest event reported): August 1, 2024

Cloudflare, Inc.
(Exact name of registrant as specified in its charter)
Delaware
001-39039
27-0805829
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)
101 Townsend Street
San Francisco, CA
94107
(Address of principal executive offices)(Zip code)
(888) 993-5273
(Registrant's telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.001 par valueNETNew York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐




Item 2.02    Results of Operations and Financial Condition.
On August 1, 2024, Cloudflare, Inc. (the "Company") reported financial results for the fiscal quarter ended June 30, 2024. A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated by reference.

The information contained in Items 2.02 and 7.01 of this report, including Exhibit 99.1 attached hereto, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that section. The information shall not be deemed incorporated by reference into any other filing with the Securities and Exchange Commission made by the Company regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
Item 7.01    Regulation FD Disclosure.
On August 1, 2024, the Company posted supplemental financial and other information on its investor relations website (https://cloudflare.NET).

The Company announces material information to the public through a variety of means, including filings with the Securities and Exchange Commission, press releases, public conference calls, the Company’s website (https://www.cloudflare.com), its investor relations website (https://cloudflare.NET), and its news site (https://www.cloudflare.com/press). The Company uses these channels, as well as social media, including its blog (https://blog.cloudflare.com), its X account (@Cloudflare), its Facebook account (@Cloudflare), and its Instagram account (@cloudflare), to communicate with investors and the public about the Company, its products, and other matters. Therefore, the Company encourages investors, the media, and others interested in the Company to review the information it makes public in these locations, as such information could be deemed to be material information.
Item 9.01    Financial Statements and Exhibits.
(d) Exhibits
Exhibit No.Description
99.1
104Cover Page Interactive Data File (formatted as Inline XBRL)



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Cloudflare, Inc.
Dated: August 1, 2024By:/s/ Douglas Kramer
Douglas Kramer
Chief Legal Officer and Secretary



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Cloudflare Announces Second Quarter 2024 Financial Results

•Second quarter revenue totaled $401.0 million, representing an increase of 30% year-over-year
•GAAP loss from operations of $34.7 million, or 9% of revenue, and non-GAAP income from operations of $57.0 million, or 14% of revenue
•Operating cash flow of $74.8 million, or 19% of revenue, and free cash flow of $38.3 million, or 10% of revenue
San Francisco, CA, August 1, 2024 — Cloudflare, Inc. (NYSE: NET), the leading connectivity cloud company, today announced financial results for its second quarter ended June 30, 2024.

"We had a strong second quarter, crossing $1.6 billion in annualized revenue and growing 30% year-over-year. The world is still complicated, but our team remained focused on execution and delivered terrific results, including a double-digit year-over-year improvement in sales productivity,” said Matthew Prince, co-founder & CEO of Cloudflare. “I'm proud of how Cloudflare rises to the occasion to help our customers solve some of the hardest problems they face when modernizing, transforming, and securing their businesses—checking off even more value with the promise of our connectivity cloud and reinforcing Cloudflare's position on 'must-have' lists.”

Second Quarter Fiscal 2024 Financial Highlights

•Revenue: Total revenue of $401.0 million, representing an increase of 30% year-over-year.
•Gross Profit: GAAP gross profit was $312.0 million, or 77.8% gross margin, compared to $233.3 million, or 75.6%, in the second quarter of 2023. Non-GAAP gross profit was $316.6 million, or 79.0% gross margin, compared to $239.7 million, or 77.7%, in the second quarter of 2023.
•Operating Income (Loss): GAAP loss from operations was $34.7 million, or 8.7% of revenue, compared to $56.2 million, or 18.2% of revenue, in the second quarter of 2023. Non-GAAP income from operations was $57.0 million, or 14.2% of revenue, compared to $20.3 million, or 6.6% of revenue, in the second quarter of 2023.
•Net Income (Loss): GAAP net loss was $15.1 million, compared to $94.5 million in the second quarter of 2023. GAAP net loss per basic and diluted share was $0.04, compared to $0.28 in the second quarter of 2023. Non-GAAP net income was $69.5 million, compared to $33.7 million in the second quarter of 2023. Non-GAAP net income per diluted share was $0.20, compared to $0.10 in the second quarter of 2023.
•Cash Flow: Net cash flow from operating activities was $74.8 million, compared to $64.5 million for the second quarter of 2023. Free cash flow was $38.3 million, or 10% of revenue, compared to $20.0 million, or 6% of revenue, in the second quarter of 2023.
•Cash, cash equivalents, and available-for-sale securities were $1,757.4 million as of June 30, 2024.

The section titled "Non-GAAP Financial Information" below describes our usage of non-GAAP financial measures. Reconciliations between historical GAAP and non-GAAP information are contained at the end of this press release following the accompanying financial data.

Financial Outlook

For the third quarter of fiscal 2024, we expect:

•Total revenue of $423.0 to $424.0 million
•Non-GAAP income from operations of $50.0 to $51.0 million
•Non-GAAP net income per share of $0.18, utilizing weighted average common shares outstanding of approximately 359 million





For the full year fiscal 2024, we expect:

•Total revenue of $1,657.0 to $1,659.0 million
•Non-GAAP income from operations of $196.0 to $198.0 million
•Non-GAAP net income per share of $0.70 to $0.71, utilizing weighted average common shares outstanding of approximately 358 million

These statements are forward-looking and actual results may differ materially. Refer to the Forward-Looking Statements safe harbor below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

Conference Call Information

Cloudflare will host an investor conference call to discuss its second quarter ended June 30, 2024 earnings results today at 2:00 p.m. Pacific time (5:00 p.m. Eastern time). Interested parties can access the call by dialing (877) 400-4517 from the United States or (332) 251-2620 internationally with conference ID 3723782. A live webcast of the conference call will be accessible from the investor relations website at https://cloudflare.NET. A replay will be available approximately two hours after the conclusion of the live event and will remain available for approximately one year.

Supplemental Financial and Other Information

Supplemental financial and other information can be accessed through the Company’s investor relations website at https://cloudflare.NET.

Non-GAAP Financial Information

Cloudflare believes that the presentation of non-GAAP financial information provides important supplemental information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations. Reconciliations of non-GAAP financial measures to the most directly comparable financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of expenses that may be incurred in the future. For further information regarding why Cloudflare believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the “Explanation of Non-GAAP Financial Measures” section at the end of this press release.

Available Information

Cloudflare intends to use its press releases, website, investor relations website, news site, blog, X account, Facebook account, and Instagram account, in addition to filings made with the Securities and Exchange Commission (SEC) and public conference calls, as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “explore,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of these words, or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. However, not all forward-looking statements contain these identifying words. Forward-looking statements expressed or implied in this press release include, but are not limited to, statements regarding our future financial and operating performance, our reputation and performance in the market, general market trends, our estimated and projected revenue, non-GAAP income from operations and non-GAAP net income per share, shares outstanding, the benefits to customers from using our products, the expected functionality and performance of our products, the demand by customers for our products, our plans and objectives for future operations, growth, initiatives, or strategies, our market opportunity, and comments made by our CEO and others. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: the impact of



adverse macroeconomic conditions, such as inflation, high interest rates, actual or potential bank failures and recessionary concerns, on our and our customers’, vendors’, and partners’ operations and future financial performance; the impact of the Hamas-Israel and Russia-Ukraine conflicts and other areas of geopolitical tension around the world, or any potential worsening or expansion of those conflicts or geopolitical tensions and other geopolitical events such as elections and other governmental changes; our history of net losses; risks associated with managing our rapid growth; our ability to attract and retain new customers (including new large customers); our ability to retain and upgrade paying customers and convert free customers to paying customers; our ability to expand the number of products we sell to paying customers; our ability to effectively increase sales to large customers; our ability to increase brand awareness; our ability to continue to innovate and develop new products and product features; our ability to generate demand for our products; our ability to effectively attract, train, and retain our sales force to be able to sell our existing and new products and product features; our sales team’s productivity; our ability to effectively attract, integrate and retain key personnel; problems with our internal systems, network, or data, including actual or perceived breaches or failures; rapidly evolving technological developments, including advancements in AI, in the market; length of our sales cycles and the timing of payments by our customers; activities of our paying and free customers or the content of their websites and other Internet properties that use our network and products; foreign currency fluctuations; changes in the legal, tax, and regulatory environment applicable to our business; and other general market, political, economic, and business conditions. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in our filings with the SEC, including our Quarterly Report on Form 10-Q filed on May 2, 2024, as well as other filings that we may make from time to time with the SEC.

The forward-looking statements made in this press release relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.


About Cloudflare

Cloudflare, Inc. (NYSE: NET) is the leading connectivity cloud company on a mission to help build a better Internet. It empowers organizations to make their employees, applications and networks faster and more secure everywhere, while reducing complexity and cost. Cloudflare’s connectivity cloud delivers the most full-featured, unified platform of cloud-native products and developer tools, so any organization can gain the control they need to work, develop, and accelerate their business.

Powered by one of the world’s largest and most interconnected networks, Cloudflare blocks billions of threats online for its customers every day. It is trusted by millions of organizations – from the largest brands to entrepreneurs and small businesses to nonprofits, humanitarian groups, and governments across the globe.

Learn more about Cloudflare’s connectivity cloud at cloudflare.com/connectivity-cloud. Learn more about the latest Internet trends and insights at radar.cloudflare.com.


Investor Relations Information
Phil Winslow
ir@cloudflare.com

Press Contact Information
Daniella Vallurupalli
press@cloudflare.com

Source: Cloudflare, Inc.



CLOUDFLARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Revenue$400,996 $308,494 $779,598 $598,669 
Cost of revenue(1)(2)
89,011 75,221 174,049 145,653 
Gross profit311,985 233,273 605,549 453,016 
Operating expenses:
Sales and marketing(1)(2)(4)
174,501 146,688 368,603 283,689 
Research and development(1)
102,547 89,610 190,250 171,149 
General and administrative(1)(3)
69,635 53,147 135,944 101,622 
Total operating expenses346,683 289,445 694,797 556,460 
Loss from operations(34,698)(56,172)(89,248)(103,444)
Non-operating income (expense):
Interest income21,715 16,536 42,967 30,023 
Interest expense(5)
(1,218)(1,539)(2,318)(3,665)
Loss on extinguishment of debt— (50,300)— (50,300)
Other income (expense), net269 (1,527)1,393 (2,384)
Total non-operating income (expense), net20,766 (36,830)42,042 (26,326)
Loss before income taxes(13,932)(93,002)(47,206)(129,770)
Provision for income taxes1,146 1,465 3,415 2,779 
Net loss$(15,078)$(94,467)$(50,621)$(132,549)
Net loss per share attributable to common stockholders, basic and diluted$(0.04)$(0.28)$(0.15)$(0.40)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted340,648 332,297 339,617 331,448 
____________
(1) Includes stock-based compensation and related employer payroll taxes as follows:
Cost of revenue$3,011 $2,126 $5,833 $3,929 
Sales and marketing24,629 20,734 46,404 36,602 
Research and development37,106 36,573 66,086 66,789 
General and administrative24,761 12,156 47,911 26,019 
Total stock-based compensation and related employer payroll taxes$89,507 $71,589 $166,234 $133,339 
(2) Includes amortization of acquired intangible assets as follows:
Cost of revenue$1,619 $4,314 $6,310 $8,625 
Sales and marketing363 574 938 1,150 
Total amortization of acquired intangible assets$1,982 $4,888 $7,248 $9,775 
(3) Includes acquisition-related and other expenses as follows:
General and administrative$162 $— $162 $— 
Total acquisition-related and other expenses$162 $— $162 $— 
(4) Includes one-time compensation charge as follows:
Sales and marketing$— $— $15,000 $— 
Total one-time compensation charge
$— $— $15,000 $— 



(5) Includes amortization of debt issuance costs as follows:
Interest expense$990 $1,307 $1,980 $2,470 
Total amortization of debt issuance costs$990 $1,307 $1,980 $2,470 



CLOUDFLARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(unaudited)
June 30,
2024		December 31,
2023
Assets
Current assets:
Cash and cash equivalents$156,967 $86,864 
Available-for-sale securities1,600,430 1,586,880 
Accounts receivable, net250,213 248,268 
Contract assets12,917 11,041 
Restricted cash short-term1,000 2,522 
Prepaid expenses and other current assets71,491 47,502 
Total current assets2,093,018 1,983,077 
Property and equipment, net339,124 322,813 
Goodwill156,162 148,047 
Acquired intangible assets, net21,663 19,564 
Operating lease right-of-use assets141,870 138,556 
Deferred contract acquisition costs, noncurrent144,330 133,236 
Restricted cash2,023 1,838 
Other noncurrent assets18,483 12,636 
Total assets$2,916,673 $2,759,767 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$59,528 $53,727 
Accrued expenses and other current liabilities66,916 63,597 
Accrued compensation 57,813 63,801 
Operating lease liabilities 40,740 38,351 
Deferred revenue370,968 347,608 
Total current liabilities595,965 567,084 
Convertible senior notes, net1,285,342 1,283,362 
Operating lease liabilities, noncurrent112,508 113,490 
Deferred revenue, noncurrent23,579 17,244 
Other noncurrent liabilities17,734 15,540 
Total liabilities2,035,128 1,996,720 
Stockholders’ Equity
Class A common stock; $0.001 par value; 2,250,000 shares authorized as of June 30, 2024 and December 31, 2023; 303,321 and 298,089 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively
302 297 
Class B common stock; $0.001 par value; 315,000 shares authorized as of June 30, 2024 and December 31, 2023; 38,216 and 39,443 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively
39 40 
Additional paid-in capital1,956,984 1,784,566 
Accumulated deficit(1,074,461)(1,023,840)
Accumulated other comprehensive income (loss)(1,319)1,984 
Total stockholders’ equity881,545 763,047 
Total liabilities and stockholders’ equity$2,916,673 $2,759,767 



CLOUDFLARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended June 30,
20242023
Cash Flows from Operating Activities
Net loss$(50,621)$(132,549)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization expense59,767 65,182 
Non-cash operating lease costs23,124 21,925 
Amortization of deferred contract acquisition costs36,991 29,011 
Stock-based compensation expense155,714 125,793 
Amortization of debt issuance costs1,980 2,470 
Net accretion of discounts and amortization of premiums on available-for-sale securities(24,028)(19,050)
Deferred income taxes(1,310)(613)
Provision for bad debt4,770 6,037 
Loss on extinguishment of debt— 50,300 
Other291 494 
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable, net(6,715)(35,413)
Contract assets(1,876)(381)
Deferred contract acquisition costs(48,085)(43,348)
Prepaid expenses and other current assets(24,726)(13,996)
Other noncurrent assets1,941 (1,991)
Accounts payable15,996 6,602 
Accrued expenses and other current liabilities254 1,454 
Operating lease liabilities(25,031)(18,149)
Deferred revenue29,695 56,460 
Other noncurrent liabilities263 627 
Net cash provided by operating activities148,394 100,865 
Cash Flows from Investing Activities
Purchases of property and equipment(61,681)(56,289)
Capitalized internal-use software(12,831)(10,703)
Asset acquisitions and business combinations, net of cash acquired(13,977)— 
Purchases of available-for-sale securities(790,675)(795,096)
Sales of available-for-sale securities— 20,248 
Maturities of available-for-sale securities792,354 857,456 
Other investing activities18 59 
Net cash provided by (used in) investing activities(86,792)15,675 
Cash Flows from Financing Activities
Repayments of convertible senior notes— (172,249)
Cash paid for issuance costs on revolving credit facility(2,148)— 
Proceeds from the exercise of stock options7,614 7,059 
Proceeds from the early exercise of stock options6 — 
Repurchases of unvested common stock— (34)
Proceeds from the issuance of common stock for employee stock purchase plan10,455 10,450 
Payment of tax withholding obligation on RSU settlement(8,763)(3,383)
Payment of indemnity holdback— (9,208)
Net cash provided by (used in) financing activities7,164 (167,365)
Net increase (decrease) in cash, cash equivalents, and restricted cash68,766 (50,825)
Cash, cash equivalents, and restricted cash, beginning of period91,224 215,204 
Cash, cash equivalents, and restricted cash, end of period$159,990 $164,379 



CLOUDFLARE, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts)
(unaudited)

Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Reconciliation of cost of revenue:
GAAP cost of revenue$89,011 $75,221 $174,049 $145,653 
Less: Stock-based compensation and related employer payroll taxes(3,011)(2,126)(5,833)(3,929)
Less: Amortization of acquired intangible assets(1,619)(4,314)(6,310)(8,625)
Non-GAAP cost of revenue$84,381 $68,781 $161,906 $133,099 
Reconciliation of gross profit:
GAAP gross profit$311,985 $233,273 $605,549 $453,016 
Add: Stock-based compensation and related employer payroll taxes3,011 2,126 5,833 3,929 
Add: Amortization of acquired intangible assets1,619 4,314 6,310 8,625 
Non-GAAP gross profit$316,615 $239,713 $617,692 $465,570 
GAAP gross margin77.8%75.6%77.7%75.7%
Non-GAAP gross margin79.0%77.7%79.2%77.8%
Reconciliation of operating expenses:
GAAP sales and marketing$174,501 $146,688 $368,603 $283,689 
Less: Stock-based compensation and related employer payroll taxes(24,629)(20,734)(46,404)(36,602)
Less: Amortization of acquired intangible assets(363)(574)(938)(1,150)
Less: One-time compensation charge
— — (15,000)— 
Non-GAAP sales and marketing$149,509 $125,380 $306,261 $245,937 
GAAP research and development$102,547 $89,610 $190,250 $171,149 
Less: Stock-based compensation and related employer payroll taxes(37,106)(36,573)(66,086)(66,789)
Non-GAAP research and development$65,441 $53,037 $124,164 $104,360 
GAAP general and administrative$69,635 $53,147 $135,944 $101,622 
Less: Stock-based compensation and related employer payroll taxes(24,761)(12,156)(47,911)(26,019)
Less: Acquisition-related and other expenses(162)— (162)— 
Non-GAAP general and administrative$44,712 $40,991 $87,871 $75,603 
Reconciliation of income (loss) from operations:
GAAP loss from operations$(34,698)$(56,172)$(89,248)$(103,444)
Add: Stock-based compensation and related employer payroll taxes89,507 71,589 166,234 133,339 
Add: Amortization of acquired intangible assets1,982 4,888 7,248 9,775 
Add: Acquisition-related and other expenses162 — 162 — 
Add: One-time compensation charge
— — 15,000 — 
Non-GAAP income from operations$56,953 $20,305 $99,396 $39,670 
GAAP operating margin(8.7)%(18.2)%(11.4)%(17.3)%
Non-GAAP operating margin14.2%6.6%12.7%6.6%







CLOUDFLARE, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Reconciliation of interest expense:
GAAP interest expense$(1,218)$(1,539)$(2,318)$(3,665)
Add: Amortization of debt issuance costs990 1,307 1,980 2,470 
Non-GAAP interest expense$(228)$(232)$(338)$(1,195)
Reconciliation of loss on extinguishment of debt:
GAAP loss on extinguishment of debt $— $(50,300)$— $(50,300)
Add: Loss on extinguishment of debt— 50,300 — 50,300 
Non-GAAP loss on extinguishment of debt$— $— $— $— 
Reconciliation of provision for income taxes:
GAAP provision for income taxes$1,146 $1,465 $3,415 $2,779 
Income tax effect of non-GAAP adjustments8,082 (88)12,372 2,449 
Non-GAAP provision for income taxes$9,228 $1,377 $15,787 $5,228 
Reconciliation of net income (loss) and net income (loss) per share:
GAAP net loss attributable to common stockholders$(15,078)$(94,467)$(50,621)$(132,549)
Add: Stock-based compensation and related employer payroll taxes89,507 71,589 166,234 133,339 
Add: Amortization of acquired intangible assets1,982 4,888 7,248 9,775 
Add: Acquisition-related and other expenses162 — 162 — 
Add: One-time compensation charge
— — 15,000 — 
Add: Amortization of debt issuance costs990 1,307 1,980 2,470 
Add: Loss on extinguishment of debt— 50,300 — 50,300 
Income tax effect of non-GAAP adjustments(8,082)88 (12,372)(2,449)
Non-GAAP net income $69,481 $33,705 $127,631 $60,886 
GAAP net loss per share, basic$(0.04)$(0.28)$(0.15)$(0.40)
GAAP net loss per share, diluted$(0.04)$(0.28)$(0.15)$(0.40)
Add: Stock-based compensation and related employer payroll taxes0.26 0.22 0.49 0.40 
Add: Amortization of acquired intangible assets0.01 0.01 0.02 0.03 
Add: Acquisition-related and other expenses— — — — 
Add: One-time compensation charge
— — 0.04 — 
Add: Amortization of debt issuance costs— — 0.01 0.01 
Add: Loss on extinguishment of debt— 0.15 — 0.15 
Income tax effect of non-GAAP adjustment(0.02)— (0.04)(0.01)
Effect of dilutive shares(0.01)— (0.01)— 
Non-GAAP net income per share, diluted(1)(2)
$0.20 $0.10 $0.36 $0.18 
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic
340,648 332,297 339,617 331,448 
Weighted-average shares used in computing non-GAAP net income per share attributable to common stockholders, diluted(2)
356,096 343,187 356,359 342,667 
____________
(1) Totals may not sum due to rounding. Figures are calculated based upon the respective underlying non-rounded data.
(2) For the period in which we had non-GAAP net income, diluted non-GAAP net income per share is calculated using weighted-average shares, adjusted for dilutive potential shares that were assumed outstanding during period.



CLOUDFLARE, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts)
(unaudited)

Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Free cash flow
Net cash provided by operating activities$74,815 $64,451 $148,394 $100,865 
Less: Purchases of property and equipment(29,625)(38,748)(61,681)(56,289)
Less: Capitalized internal-use software(6,915)(5,733)(12,831)(10,703)
Free cash flow$38,275 $19,970 $73,882 $33,873 
Net cash provided by (used in) investing activities$(183,742)$108 $(86,792)$15,675 
Net cash provided by (used in) financing activities$7,143 $(168,612)$7,164 $(167,365)
Net cash provided by operating activities
(percentage of revenue)		19 %21 %19 %17 %
Less: Purchases of property and equipment
(percentage of revenue)		(7)%(13)%(8)%(9)%
Less: Capitalized internal-use software
(percentage of revenue)		(2)%(2)%(2)%(2)%
Free cash flow margin(1)
10 %6 %9 %6 %

____________

(1) Totals may not sum due to rounding. Figures are calculated based upon the respective underlying non-rounded data.



Explanation of Non-GAAP Financial Measures

In addition to our results determined in accordance with generally accepted accounting principles in the United States (U.S. GAAP), we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. In particular, free cash flow is not a substitute for cash provided by operating activities. Additionally, the utility of free cash flow as a measure of our liquidity is further limited as it does not represent the total increase or decrease in our cash balance for a given period. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided above for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with U.S. GAAP. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Items Excluded from Non-GAAP Measures. We exclude stock-based compensation expense, which is a non-cash expense, from certain of our non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance. We exclude employer payroll tax expenses related to stock-based compensation, which is a cash expense, from certain of our non-GAAP financial measures because such expenses are dependent on the price of our Class A common stock and other factors that are beyond our control and do not correlate to the operation of our business. We exclude amortization of acquired intangible assets, which is a non-cash expense, related to business combinations from certain of our non-GAAP financial measures because such expenses are related to business combinations and have no direct correlation to the operation of our business. We exclude acquisition-related and other expenses from certain of our non-GAAP financial measures because such expenses are related to business combinations and have no direct correlation to the operation of our business. Acquisition-related and other expenses can be cash or non-cash expenses and include third-party transaction costs and compensation expense for key acquired personnel. We also excluded the one-time cash compensation charge incurred during the three months ended March 31, 2024 from certain of our non-GAAP financial measures because it was not attributable to services provided and did not correlate to the ongoing operation of our business. We exclude amortization of debt issuance costs and loss on extinguishment of debt, which are non-cash expenses, from certain of our non-GAAP financial measures because such expenses have no direct correlation to the operation of our business.

Non-GAAP Gross Profit and Non-GAAP Gross Margin. We define non-GAAP gross profit and non-GAAP gross margin as U.S. GAAP gross profit and U.S. GAAP gross margin, respectively, excluding stock-based compensation and related employer payroll taxes and amortization of acquired intangible assets.

Non-GAAP Income (Loss) from Operations and Non-GAAP Operating Margin. We define non-GAAP income (loss) from operations and non-GAAP operating margin as U.S. GAAP loss from operations and U.S. GAAP operating margin, respectively, excluding stock-based compensation expense and its related employer payroll taxes, amortization of acquired intangible assets, acquisition-related and other expenses.

Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) per Share, Diluted. We define non-GAAP net income (loss) as GAAP net income (loss) adjusted for stock-based compensation expense and its related employer payroll taxes, amortization of acquired intangible assets, acquisition-related and other expenses, amortization of issuance costs, loss on extinguishment of debt, and a non-GAAP provision for (benefit from) income taxes. Generally, the difference between our GAAP and non-GAAP income tax expense (benefit) is primarily due to adjustments in stock-based compensation and related employer payroll taxes, amortization of acquired intangibles associated with business combinations, acquisition-related and other expenses, and amortization of issuance costs. We define non-GAAP net loss per share, diluted, as non-GAAP net loss divided by the weighted-average common shares outstanding. Calculation of non-GAAP net loss per share, diluted excludes all potentially dilutive securities as their effect is antidilutive. We define non-GAAP net income per share, diluted, as non-GAAP net income divided by the weighted-average common shares outstanding, adjusted for dilutive potential shares that were assumed outstanding during period. Currently, potential dilutive effect mainly consists of employee equity incentive plans and convertible senior notes. We believe that excluding these items from non-GAAP net income (loss) per share, diluted, provides management and investors with greater visibility into the underlying performance of our core business operating results.

Free Cash Flow and Free Cash Flow Margin. Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by operating activities less cash used for purchases of property and equipment and capitalized internal-use



software. Free cash flow margin is calculated as free cash flow divided by revenue. We believe that free cash flow and free cash flow margin are useful indicators of liquidity that provide information to management and investors about the amount of cash generated from our operations that, after the investments in property and equipment and capitalized internal-use software, can be used for strategic initiatives, including investing in our business, and strengthening our financial position. We believe that historical and future trends in free cash flow and free cash flow margin, even if negative, provide useful information about the amount of cash generated by our operating activities that is available (or not available) to be used for strategic initiatives. For example, if free cash flow is negative, we may need to access cash reserves or other sources of capital to invest in strategic initiatives. One limitation of free cash flow and free cash flow margin is that they do not reflect our future contractual commitments. Additionally, free cash flow does not represent the total increase or decrease in our cash balance for a given period.


v3.24.2.u1
Document and Entity Information Document
Aug. 01, 2024
Cover [Abstract]  
Document Type 8-K
Document Period End Date Aug. 01, 2024
Entity Registrant Name Cloudflare, Inc.
Entity Central Index Key 0001477333
Amendment Flag false
Entity Incorporation, State or Country Code DE
Entity File Number 001-39039
Entity Tax Identification Number 27-0805829
Entity Address, Address Line One 101 Townsend Street
Entity Address, City or Town San Francisco
Entity Address, State or Province CA
Entity Address, Postal Zip Code 94107
City Area Code 888
Local Phone Number 993-5273
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Class A Common Stock, $0.001 par value
Trading Symbol NET
Security Exchange Name NYSE
Entity Emerging Growth Company false
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